Investor insights: Startups in Ghana are not just locally, but globally relevant

Ross Baird — Executive Director of Village Capital— reports from Nairobi, Accra and Lagos this week. He joins digital pioneers Jean and Steve Case along with the Case Foundation from the U.S. in exploring the entrepreneurial ecosystems in Kenya, Ghana and Nigeria. See his previous post on the Nairobi ecosystem. The trip wraps up Friday in Lagos.

“Startups are the seed corn of the future economy,” our partner Steve Case [Co-founder of America Online (AOL), now Chairman of Case Foundation — Ed.] often says. Today, Silicon Valley is envy of the entrepreneurial world, but 50 years ago, Silicon Valley was apple orchards. Detroit, then the wealthiest city in the U.S. in terms of median income because it was the center of the half-century’s greatest innovation—the car—has now slipped to the U.S.’s poorest major city, because it stopped innovating. As we’ve traveled from Kenya to Ghana, we’ve seen how planting seeds in an entrepreneurial ecosystem can really mature.

The first thing to know about the Ghanaian startup ecosystem is the Ghana economy is itself a ‘startup’. The country has been capitalist since 1992, so only one generation has lived in a free-market society. But the next generation is fully embracing startups: the country is on the move.

We visited SMSGH, a ten-year-old startup employing dozens of people and powering mobile transactions across East Africa; DTRT, a manufacturing factory employing hundreds of people in great working conditions, and saw nine exciting companies pitch in the ImpactHub Accra, followed by a very fun happy hour that felt more like a beach party than a networking session.

Nairobi vs Accra

If you simply compared first impressions from Nairobi and Accra, you might have thought the startup ecosystem was really rough around the edges here in Ghana. But to me, the Kenya to Ghana transition was encouraging. Ghana today, in 2015, seems not too far away from Kenya five years ago. Erik Hersman and team were just then solidifying the iHub; about 20 investment groups now active in Kenya were not active then; and the entrepreneurial ecosystem was fragmented. Based on the evidence of promise we saw in Ghana today, Accra can get there.

Local investment is impressive

We spent several days with local investors: the Oasis Fund, the African Angels Network, and Eric Osiakwan, who has a Steve Case-like reputation in Ghana as the startup champion in the country. One of the more difficult conversations I have had to have over the years in Kenya, where the ecosystem is thriving, is with local Kenyan investors: in reality, in Kenya, successful businesspeople do not invest in startups very often. It is difficult sometimes for me to justify why we invest internationally in Kenya when successful local entrepreneurs won’t do it. Now—that is changing, and Julian Kyula of MODE, who partnered with us on the Pitch for Impact competition in Kenya is a great example—but in Ghana, successful business people have been investing in startups for quite a while.

As a few examples: the Oasis Fund has 40% of its limited partner base in-country; the Ghanaian angels’ network has over 25 locals who have done a deal in the last two years, and Eric Osiakwan walked us around SMSGH, one of his portfolio companies, as a bigger cheerleader than the CEO.

One Ghanaian said that local self-reliance, as a relatively closed economy, was an important trait for a very long time—and in Africa, when it comes to locals investing in the next generation, Ghana may well be leading the way.

Culture and policy both pose challenges and opportunities.

At the same time, Ghana has a long way to go. Unlike Kenya, where entrepreneurship is encouraged, stepping out and starting your own company isn’t in Ghana. Whether it’s cultural or whether it’s a vestige of a socialist system that didn’t reward the free market, one entrepreneur said, “in Ghana, everyone is afraid of getting too big.” Policy and economic conditions are difficult too. Kwami, whose company, Moringa Connect, is a great agribusiness that mentioned how difficult startup investment was to raise for one major reason—bank interest rates are 28%, and it’s difficult even for an exceptional startup to outperform that.

Yet despite these challenges, Ghana has several local conditions that make it globally competitive. The factory we visited, DTRT (for Do the Right Thing), can employ hundreds of people in quality working conditions and sell to major US retailers because Ghana’s port is a free trade zone (a vestige of Ghana’s exports of coffee and other cash crops), as well as an agreement with the US to not impose tariffs on imports of the 48 poorest countries in Africa. Ghana has the ability to create 1 million manufacturing jobs, estimated our leader at DTRT—thanks to policy that supports small manufacturing businesses.

Finally, while Ghanaian culture could be a challenge, Ghana’s creativity and vibrancy also is a major advantage. We had a breakfast with creatives from across Ghana, which is becoming a burgeoning fashion and entertainment industry. The talk of Africa is “An African City,” Ghana’s “Sex in the City” equivalent, and the producer joined artists, fashion designers, and more to show off Ghana’s edge in cultural leadership.

Great assets can make Ghana not just locally, but globally relevant

Despite the challenges, at a spirited dinner, businesspeople and investors were bullish on Ghana’s prospects. In discussing the entrepreneurial potential of Africa, they settled on the KINGS (Kenya, Ivory Coast, Nigeria, Ghana, South Africa) as the top five highest-potential entrepreneurial ecosystems—and Ghana ended up #3. How come? Ghana had strong assets that were exportable across Africa and the world: the most educated population in Sub-Saharan Africa, English language background, relatively good infrastructure, a good and functioning port, and more.

In the Pitch for Accra competition, we saw these assets on display. Farmerline, which delivers information to farmers over mobile—helping them to increase their income through better understanding of crop prices and more—is off to a great start in Ghana and importing to East Africa. Flippy Campus, a mobile solution that helps schools manage information (replacing paper noticeboards), is building on Ghana’s asset of having the best educational system in Sub-Saharan Africa. And amazingly, Bitsoko, a blockchain-powered financial services solution, has as an early customer a local food market in Detroit—helping power the entrepreneurial revolution that is rebuilding a once-great American city. African solutions are not just solving problems in Africa, but helping around the world.

Africa Keeps Going

The winner of Pitch for Accra was Yago Baatuolku, a wonderful leader whose company, Wanjo, produces juice sourced from 250 women farmers in Ghana. Ghana is one of the leading juice consumers worldwide, and if Ghanaians only drank juice produced in Ghana, they would send $250M a year to farmers—currently, it’s only $10M.

Yago has a wonderful business but never felt like she was ready to pitch. When Sheila Herrling of the Case Foundation encouraged her to “be fearless” and pitch, though, she brought down the house, treated the happy hour to Wanjo juice, and took home a $25K investment. Her response: “I’m so glad I decided to show up,” she said. In a culture that doesn’t always encourage entrepreneurs, showing up is critical.

We asked the CEO of SMSGH what advice he would give, 10 years in, to a Ghanaian entrepreneur starting out, he said “Just keep going.” He said that there would be a lot of social, cultural, and maybe even political pressure to slow down, not get too big, and not get too visible—and a lot of unexpected bumps along the way. He said that the only reason he was able to build a company was that he kept going.

If Ghana just keeps going, and Africa just keeps going, we’ll see a transformed ecosystem—and Ghana can move light years in the next five years. Who knows what we can see in the next 50.